Newport approves marina rent hike for commercial users

Operators can choose to pay per square foot or a percentage of their gross revenue.

By Jill Cowan

October 23, 2012 | 10:20 p.m.

Large commercial marina owners operating on public tidelands will pay more rent, the Newport Beach City Council decided Tuesday at a special meeting — but they won't see the changes until 2015.

After months of back-and-forth with harbor stakeholders, the council voted 4 to 3 to adopt a set of proposed changes to the way commercial marina rents are calculated, as laid out in presentations by City Manager Dave Kiff and Councilman Michael Henn.

Harbor business owners who operate large commercial marinas will eventually pay about 18.5% of their gross slip revenue, or an amount that would translate to about $1.97 per square foot right now. That increase will be phased in at a rate of about 2.5% of gross slip revenue per year, from 2015 to 2020.

Operators will be able to choose between two rent calculation methods. One will allow them to pay the flat 18.5% with periodic audits. Or they can avoid the audits and pay a dollar amount per square foot based on a marina index rate that is calculated based on rents charged by commercial marinas not on public tidelands. The differences between the two calculations would be relatively small.

Currently, marina operators pay about 36 cents per square foot, or about 3.4% of gross slip revenue under an annual permitting system. The adopted changes — unlike earlier iterations of the proposals — allow marina owners to choose between a longer-term lease or continue with an annual permit. Both options are subject to rent increases.

The increases are one aspect of Newport's ongoing effort to update decades-old fees for various city-administered public tideland uses, though Kiff stressed that Tuesday's vote affects only large commercial marinas. The city, he said, is legally bound to charge rent in line with fair market values. The city tripled mooring fees in 2010, and at Tuesday's meeting, laid out some possible rent structures for yacht clubs, shipyards, fuel docks and other harbor users to be discussed at future meetings.

Critics have said the increases are money grabs by the city and addressing different harbor uses separately is an unfair "divide-and-conquer" tactic.

"We've had a very significant amount of public input, and we've made very substantial changes, including to the lease template," Henn said, perhaps in anticipation of the onslaught of public comment against the proposal. "I think there's a number of very large misconceptions about what's being proposed and the impacts of what's being proposed."

Henn said that while talk leading up to Tuesday's meeting suggested that the harbor economy would collapse as a result of rental increases, those fears were overblown.

"I don't consider it to be a broad-based destructive impact, as some people in the harbor seem to believe," he said.

Still, as in past discussions of tideland rent increases, dozens speakers came forward to protest the changes, citing a variety of concerns. One echoed by multiple speakers, including attorney Bill Hart, who was representing Duffy Electric Boat Co., was that by taking on fee increases for commercial marina operators, residential dock owners and other harbor users as separate issues, the city is skirting California Environmental Quality Act requirements.

"For some reason, the city has decided that this deliberation should be broken up into some pieces," Hart said. "The problem with that is that it's our view that CEQA requires the project be considered as a whole and not broken up into segments."

The rent increases, he continued, would have a big impact on the harbor as a whole, which would make the fee increases subject to a CEQA review before they could be implemented.

At a Sept. 12 meeting City Attorney Aaron Harp said the rent changes are not subject to CEQA.

"We've taken a lot of time to look at this," he said Tuesday. "It's our contention that the adoption of a lease or permit process is merely setting a business template — not a project."

"From what my understanding is, we now have a proposal that is agreed upon except for one critical aspect. That's the price," Gardner said. "I'm hoping if we proceed, we will come up with a different figure."

Councilman Rush Hill, who effectively had the deciding vote, said he thought changes needed to be made and that the city does need to charge fair market rent rates. The economy, however, makes shouldering any extra costs difficult for small businesses.

"I think it's the right thing to do, but I think it's the wrong time to do it," he said. Hill moved to push the phase-in out to 2015, as opposed to 2013. The motion carried.

Marshall "Duffy" Duffield of Duffy Boat said after the meeting that despite the night's vote, harbor denizens will be back in full force for other fee adjustment discussions.

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